Ex-BayernLB Chairman Says Managers Didn’t Mislead Over Hypo Alpe

March 18 (Bloomberg) -- Bayerische Landesbank’s managers
didn’t mislead its administrative board over the acquisition of
Hypo Alpe-Adria Bank International AG, the former chairman of
the board told a Munich court.

“The information given by the management board to us was
precise and comprehensive,” Kurt Faltlhauser, who headed
BayernLB’s administrative board from October 1998 to June 1999
and from July 2002 until July 2005, said in testimony today. “I
wasn’t misled.”

Former BayernLB executives are on trial over the takeover
that led to 3.7 billion euros ($5.1 billion) of losses.
Prosecutors allege they didn’t inform the state-owned lender’s
administrative board correctly and overpaid by 550 million euros
when they purchased a majority stake of Klagenfurt, Austria-based Hypo Alpe-Adria for 1.63 billion euros in May 2007. They
are charged with “breach of trust,” a criminal offense in
Germany that punishes misuse of other people’s money. All of
them deny the charges.

“The due diligence didn’t reveal any deal-breakers,”
Faltlhauser said. “The risks were assessed during the due
diligence. We had more than 800 risk managers at BayernLB at the
time, there were plenty of experts available. The process was
well-structured and not chaotic, as suggested by media
reports.”

In the case, the first in Germany to put management board
members on trial for overpaying for an acquisition, prosecutors
allege the executives at state-owned BayernLB rushed the deal.
They didn’t properly assess the risks and didn’t include
precautions in the agreement because they were under political
pressure to buy Hypo Alpe-Adria after they lost the bidding for
Vienna-based Bawag PSK Bank in 2006.

‘Too Stupid’

“Following BayernLB’s failed bid for Bawag, I never said
that BayernLB’s management was too stupid to buy a bank,”
Faltlhauser said, referring to a claim by prosecutors, who argue
that accusation put pressure on BayernLB’s managers to act. “It
was a complex situation back then.”

In the wake of the financial crisis, BayernLB’s acquisition
of Hypo Alpe-Adria a year later turned into a disaster, causing
the losses at BayernLB until 2009, when the unit was sold to the
Austrian government for one euro. The losses have triggered
litigation between the two banks and probes in both countries.

BayernLB’s administrative board is comparable to a
supervisory board at listed companies in Germany. Under
Germany’s two-tier system, the management board is responsible
for day-to-day operations while the supervisory board oversees
the management board.